Hospitality in action as a business strategy

The restaurant industry has become a massive business worldwide and yet to thrive in it is like treading a minefield. This can be explained by using a Porter’s 5-force analysis of the restaurant industry. Firstly, unlike most industries, entering the restaurant business is easy. Secondly; the ease of entry means new entrants posing a permanent threat to the business. Thirdly; the sheer number of restaurants in the city causes intense competition. Fourthly; threat of substitutes - like eating at home, food malls, supermarkets (that offer Ready-made meals), street vendors, etc. Fifthly; high failure rate in this industry. (In the US it is 30% or more).

Hence, when a customer chooses a specific restaurant or hotel, the "win" for the operator extends far beyond a single transaction. It triggers a chain of financial and operational advantages that sustain the business.

Richard Coraineco – founder of Union Square Hospitality Hotel Group clarifies it best, when he says “One of the concepts that are most important to us is essentiality. Say you go to a Union Square Cafe tonight. You just chose us over 12,000 other options in New York. First, thank you! We just won a huge popularity contest because we made the top of your list with all those choices. If you return a second time in a month or two, I will beat out that whole group again. If you come a third time, we’ve gotten you to a point where you “want” to be there because of how the experience makes you feel.”

He goes on to add “This is hospitality in action as a business strategy. When you practice Enlightened Hospitality in a natural and intuitive way, you are creating positive and memorable experiences. You’re demonstrating your key constituents matter to you personally, and that makes good business sense. We are driven by emotion, and feeling valued and cared for fosters productivity, trust, and growth.”

What Coraineco says, reinforces the primary reason consumers cite when asked how they’ll chose a brand in the future; it’s not merely value, quality, or convenience but “positive past experiences with the brand. It also calls for operators to regularly reinvent the customer experience to avoid stagnancy.

Unfortunately, many leaders fail to see the big picture by focusing  on boosting revenue and not building customer relationships by making  shortsighted cost-benefit trade-offs. A common view is that for a restaurant to be successful, it just has to offer good food (the tangible). That is far from the truth. Food alone does not guarantee that; unless satisfactory restaurant service (the intangible) is linked to the overall operation. There are many customers who usually are unaware of being served well; but they do know when they do not receive good service.

From a customer’s perspective, not many of us realise that eating out in a restaurant is not a random choice, but a ‘thought-out’ purchase. How often have you faced the dilemma of making choices like selecting a restaurant? How does one explain the decision-making process? For instance, when I want to eat out, I am guided by different factors, namely: Personal, Product Situational and a Universal set of rules.

• Personal factors are varied and involve activation of need and drive, such as the urge to give myself a break from eating at home or a craving for a certain type of food.
• Product factors relate to whether I want to enjoy a buffet or have a sit-down meal - be it a particular cuisine (Italian, Thai, Indian, etc), and whether in a fine-dining or casual setting.
• Situational factors may include whether the occasion is for personal use (an romantic dinner), or to be consumed with others (Business dinner, dinner party, or a celebration with family and friends).
• The Universal set includes location (and alternatives), cleanliness (hygiene factor), does the restaurant sell alcohol (for those who want to have wine with their meal). For the first-time diner the questions may range from will food be as good as I have been told? Will it be worth the money spent on the meal (financial)? Will I be OK after eating that unfamiliar food? (Especially to those who have food allergies).

Last but not least, most consumers are also faced with pricing issues. The majority of diners have an upper limit that they fix for the cost of a meal. Let’s compare two restaurants (A & B). Although both restaurants serve good food, restaurant A is perceived as serving food that is superior in quality than restaurant B. However, the cost of a meal in restaurant A is well above the upper limit threshold set by the decision maker. In such a scenario, restaurant B will be preferred.

Shafeek Wahab - Editor, Hospitality Sri Lanka, Consultant, Trainer, Motivational Speaker, Mystery Guest Auditor, Ex-Hotelier

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